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tv   Charlie Rose  PBS  June 4, 2011 1:00am-2:00am EDT

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>> rose: wilt come to our prprogram, we begin this evening with the indictment of john edwards, former senator of north carolina and president alcan data with mark halperin, pete williams can and jeff toobin. >> there's no question that i've done ong and i take full responsibility for having done wrong. and i will regret for the rest of my life the pain and the harm that i have caused to others. but i did not break the law. and i never, ever thought i was breaking the law. thank you all very much. >> there has never been as far as i'm aware a criminal prosecution based on violatinthe federal campaign law in thisay. and these payments, at least
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do not on the surface look like traditional campaign contributions. i mean it may be that they were campaign contributions. but they didn't go through the campaign. the campaign didn't know about them. and i think there is a possibility that you could argue to a judge, to throw out the case or to the jury to acquittal and say look, this was bad behavior by john edwards. but whatever else it was t wasn't a violation of the campaign-finance laws. at's a plausible argument. >> rose: and we conclude this evening with this question, what's happened to the economic recovery? andhat's needed now. we talk to paul krugman, david walker, jared bernstein and ken rogoff. >> there really has never been much of an economic recovery. when all is said and done. i like to look, what are the fraction of adults who are employed. that fell off a cliff between 2007 and 2009 and it has really not recovered at all. it has been bouncing along.
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so basically we're in a holding pattern. in an economies that's growing but job growth is no-- population growth. >> rose: does job growth have anything to do with increased productivity. people still doing more with less in terms of workers. >> that always happens. but what is happening no there isn't work for these workers to do. it is that they are in spending power. >> rose: an indictment of a former presidential candidate and questions about the economic recovery when we continu >> funding for arlie rose was provided by the following. every story needs a hero we can all root r. who beats the odds and comes out on top. additional funding provided by these funders: but this isn't just a hollywood storyline. it's happening every day, all acrossmerica. every time a storefro opens. or the midnight oil is burned.
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or when someone chases a dream, not just a dollar. they are small business owners. so if you wanna root for a real hero, support small business. shop small. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> . >> rose: we begin with the indictment of john edwards former senator from north carolina and two time presidential candidate. earlier today a federal grand jury indicted him on six counts. he is accused of soliciting and accepting iegal campaign contributions. he's also charged with using a portion of that money to
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help cover up an extramarital affair. edwards appeared in court today in winston-salem north carolina and denied all charges and pleaded not guilty. >> there's no question that i have done wrong. and i take full responsibility for having done wrong. and i will regret for the rest of my li the pain and the harm that i have caused to others. but i did not break the law and i never ever thought i was breaking the law. thank you all very much. joining me now is jeffrey toobin of the "new yorker" magazine and cnn, from washington, d.c. mark halperin of "time" magazine and pete williams of nbc news. i'm pleased to have all of them here on this program. pete, let me begin with you. give us the legal case that's being made against john eards. >> well, it all comes down to what was the money for. itertainly is no illega, it's certainly unwise but
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not illegal under federal law to have a mistress or try to cover up that fact. or even to ask other people for money to do it. the problem according to the government is that this was tied centrally to edwards campaign. the justice departmt sa today that the whole point of his campaign was to present himself as a miliman that if this had become public it would have been devastating it would have destroyed his campaign. and so that the money was raised to rescue the campaign. the keep the campaign from having to deal with this problem. to have to divert resources, to have to answer the charges and all the money the government says was to keep his mistress on ice. it was paid for travel expenses, hotel rooms, houses, medical care and therefore they stay that-- say that violated the law. how did it violate the law? because the government says the people who gave the money to edwards violated the limit on how much individuals can give to a campaign which is only or at the time was only 2300, and in fact they gave a total of
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$925,000. sohat's the governmen's case. >> rose: is the case in part simply following the money as i assume it is, but also are there people who wereon e inside, have turned against john edwards and are saying this is what happened and this is why it happened and i was part of it? >> well, yes, most notably andrew young who was central to his campaign. a personal assistant to edwards. and he was very much involved in receiving the money. and in fact, the government says that one of the wealthy benefactors here, rachel bunny men. heir to the melon fortune actually sent him a note because in april of 2007 she was up set about the coverage of edwards spendsing $400 on a haircut. so she said i was furious that people are attacking edwards for this and now i'm quoting from this note that in the indictment she says it inspired me. from now on all haircuts, et cetera, that are necessary and important for the campaign, please sd the bills to me as a way to help our friend without government restrictions.
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so the justice department is saying this shows that the money that she ended up giving edwards to help keep the mistress out of the public eye was in service of the campaign, and to t to get around the campaign laws. >> is this, is it prostitution? what kind of case do they have? and are you surprised that this indictment came down? >> well, there's beea big buildup here it wasn't surprising that it came down. but you know this is a case, this is a paradox about this case. it is factually devastating. who would want to present to the jury this guy whose wife was dying of cancer. he has thi affair. elies about it. he recruits his aide with this ridiculous idea of saying that he's the father, that andrew young, for a while says he's the father of the child. i mean the facts are a pauling. but legallyi think it's a very problematic case. i-- . >> rose: a weak case for the prosecution. >> i don't know about weak. but-- . >> rose: problematic. >> problematic in the sense that there las never been as
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fars as i'm aware a criminal prosecution based on violating the federal campaign law in this way. and these payments, at least do not on the surface, look like traditional campaign contributions can. i mean it may be that they were campaign contributions but they didn't go through the campaign. the campaign didn't know about them. and, i think there is a possibility that you could argue to a judge to throw out the case or to the jury to acquittal and say look, you know, this was bad behavior by john edwards. but whatever else it was, it wasn't a violation of the campaign-finance laws. that's a plausible argument. >> rose: that is john edwards argument, it is bad behavior for which i apologise. >> but this is not a crime. >> rose: if you look at what's transpired, was there an effort at plea bargaining and was there a bargain that john edwards turned down as far as w know? >> there certainly was an effort to negotiate some sort of resolution of this case.
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two issues were th big stumbling blocks, wther he would go to prison and whether he could keep his law licence. apparently there could be no meeting of the minds. >> rose: if he accepted a ea of a felony he could not keep his law licence. >> basically that's the rule. it varies by state. that gets more complicated than you think. the whole-- . >> rose: but going to prison wasn't part. >> that was one of the thins being negotiated. john edwards didn't want go to prison. no kidding. >> rose: how much of this is potica mark. you covered this campaign. you know this candidate. you know a lot about, sort of, how politics work. >> well, for the sake of not wanting more controversy in our lives, it's a good thing that it is a democratic politician and a democtic justice department so that is not an element are going after him for partisan purposes. it started in the previous administration and continued under this administration. i think the case, if it were being tried by a bunch of experts like jeff and pete and other people familiar with the history of fec law, there would be no chance of
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a conviction. there has never been a case like this. i think though for a normal jury if it does go to trial, and of course costill strike a deal, i think a normal jury may see the facts of this case and not care about the history of fec prosecutions can, campaign law finance prosecutions. >> rose: and therefore they would convict him or they would not convict him based on -- >> i think it is a weak case for experts but it may in the end be a strong case for laypeople sitting on a jury who just see the fact pattern. i mean as far as inow there's not much dispute about the cts of the case. about at money was solicited. one thing we know is that andrew young would almost certainly be a star witness. and easily discredited witness at any trial. what we don't know from the indictment, fred barn was one ofhe other major people involved, a democratic fund-raiser, lawyer from texas. he has passed away. what we don't know is who else in the edwards orbit
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knew about this and may have to be part of a trial. lots of people went before the grand jury. we know very little about that. that could produce a lot of angst within certain democratic circles. >> and another odd factual matter in this case is that bunny melon, the other source of the money, bunny melon is literally 100 years old. she apparently testified in the grand jury by video. it is far from clear whether she is going to be able to testify. so h the government will be able to prove this without fred barron and possibly without bunny melon is an interesting question. there is one factual matter that i think is very much up in the air. that i certainly don't have the answer to. maybe pete does. maybe mark does. is how much edwards himself was involved in setting up this financial transaction. did he ask melon. did he ask barron for the money? that, that's very important to this case. that'shy andrew young's testony bo was apparently the intermediary is going to be the absolute center piece
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of this case because he is going to characterize edwards behavior in a way that-- . >> rose: that he went as edwards agent to do this and under his instructions. >> correct. we know from game change, we know from young's own book, the politician, some of this. but it's-- i mean his testimony is going to be critical. >> rose: pete, do you know anything about the question that he raises as to whether edwards was personally involved in this in terms of what we know from either law ensources or those who cover the campaign. >> the government is making an allegation that he was involved in a conspiracy, that certainly included, whether he solicited the money directly or not, that he was involved in decisions not to tell the federal elections commission about it. that he had has other points of involvement in the conspiracy. back to bunny melon for a moment and the fact that she is 100. i asked the justic department official today well, ift was illegal for edwards's campaign to accept this money because it exceeded the limit, surely
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it was illegal for the contributors to give it. so why weren't the contributored dicted and one of the answers we got is well, one of them is 100 years old. >> rose: and the other is dead. >> the other is dead, that's right. >> both of which make them unappealing defendants it is safe to say. >> one other thing about the edwards defense here, one of the thins that they are saying, charlie, is that the money was raised, yes, to conceal the affair. but not to conceal at fair from the public but to conceal th affair fm elizabeth ed wardz. and therefore this was a personal solicitation of money. this money was to be spent for personal reasons, not political reasons. whether that is an appealing argument to be made or not that is one of the thins that they say is part of their defense and shows why this doesn't come under the campaign laws. >> two things that up set me about the indictment besides the fact that it is a novel case and maybe one without precedent. one is the edwds children who have been through so much already. this is only going to extend the public agony they have
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to go through. and you know, i would have liked the justice department to take that into account. the other thing is i have covered lots of presidential campaigns where there seem to be violations that were significantly more egregious, that impacted the outcome of a race rather than just the justice department seeking justice. and making a point about what edwards, with the purpose of it wa so it seems a strange use of the justice department resources to go so deep on this case and not on so many. other cases where there seem to be violations that are more meaningful. >> and just to emphasize the point that mark made. a lot of the transactions at issue in this caseere after edwards had already withdrawn his campaign. i mean he had already stopped running for president. now the cover-up continued. but you know, it's hard to argue that the public was much damaged by you know, failure to report campaign contributions for a campaign that was defunct. and again, that raises the
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question of the appropriateness of this ca. i doubt a jury's going to be much persuaded by that but it is question about whether this case should have been brought. >> rose: mark, did everybody know about this affair in the campaign and just didn't, couldn't find the acts-- facts or -- >> no, i think based on the reporting. >> rose: the concealment work well? >> very few people within the campaign knew about it. lotsf people knew that real hunter was around tax that she was problem at in, that edwards had an improper relationship with her of some sort. but very few people, as far as i know, knew about the relationship, knewabout the child. and they stuck with him all the way through the period when he was dealing with the allegations initially and in the eve of the iowa caucuses in 2007 and into 2008 and bend that as he continued to try to negotiate and bargain his endorsement with john edwards barack obama and hillary clinton. people did not know about it and one of the real tragedies is that first and
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foremost i said befo the edwards children, is y've got somef the top talent in the democratic party who were attracted to edwards and worked with him. almost all of them to a person now odisillusioned, will almost l of them to a person are out of politics. and i meet people all the time who supported edwards, donors or young staffers, extraordinarily disillusioned personally and professionally and this is only going to prolong that and extend that. >> rose:as anyone talked to edwards since this. has he had any interviewed. has he expressed himself other than what he said today? >> not that i know of, no. and you know, what makes the trial so problematic for him is how did he make the decision about whether to testify in his own defense. because if he does testify, they will put on, the prosecution will cross-examine him with his tearful denial of this relationship. his tearful, you know, i believe it was barbara walters or whoever was the anchor who interviewed him.
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>> rose: bob woodruff. >> you know, his very similarly emphatic. everybody remembers john edwards. and you know, as he later acknowledged, a complete lie. so you know, will he risk testifyinging to be cross-examined with his flat out lies that he's told before? that's a very tough decision. >> and in fact therere references to those denis and the statements he made in that interview in the indictment. >> on the other hand t star witness is going to be a guy who is an admitted liar. andrew young. and i think john edwards, the experienced trial lawyer, i bet you has already thought a lot about how the defense should approach andrew young on cross-examination after he s been on the stand to try to undermine his credibility that shouldn't be very hard. >> i was wondering, charlie, and i wonder if jeffrey has a view on this can could ask for a bench trial. he could ask for this trial to be heard by the judge and not e jury. now my understanding is the government would have to agree to that but he could certainly ask for that. >> he could. and it might not be a bad
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idea. the government, this varies by u.s. attorney's office. my u.s. attorneys office when i was a prosecute never brooklyn, federal prosecutor in brooklyn. wead a policy. we never agreed to bench trials. and i wouldn't be surprised that the north carolina prosecutors wouldn't agree to it too, just because it is such a good idea for edwards. >> ros what's the time line now? >> july 11th. >> rose: july 11th is when -- >> is the trial date. >> rose: ah. >> but i can't believe it will actually go on july 11th there are a lot of legal issues here. they will certainly move to dismiss theindictment. i would be surprised if it actually proceeded july 11th. but a lot of federal judges take the deadlines very seriously. it won't be a year. i mean they will move this thing along. >> rose: thank you, jeffrey, thank you, mark, thank you, pete. >> thank you, charlie. >> you bet. >> rose: we continue this evening with a growing concerns about the economic recovery. new job numbers released
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today fell below expectations, employer added 54,000 new workers in may, but it was the smallest gain in eight months. the unemployment rate also rose from 9 to 9.1%. today's data is the latest sign that the economic recovery is faltering. high gas and food prices have eaten into consumer spending. natural disasters in japan have hurt manufacturing, housing prices have dipped to their lowest level since 2002. today president obama acknowledged the economic faced strong headwind but he pointed to the rescue of the auto industry as he spoke from a chrysler assembly plant. >> there are always going to be bumps on the road to recovery. we're going to pass through some rough terrain. that even a wrangler would have a hard time with. we kw that. >> wrangler over anything, can go over anything, huh? we have got a lot of work to do. but we're going to get there. and if anybody tells you
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otherwise, i want you to remember the improbable turn around that's taken place. >> rose: joining me now paul krugman columnist for he new yorkimes". he won the-- david walker founded the comeback erica initiative. he previously served as cromp -- comptroller general of united states. and jared bernstein. he was economic policy advisor to vice president joe biden until this past april. from boston ken rogoff of lar vard university, previous chief economist at the imf. i am pleased to have all of them here. i will start with paul krugman. what's happening to the ecomic recovery? >> there really has never been much of an economic recovery. when all is said and done i like to look just-- what are the fraction of adults who are employed that fell off a cliff between 2007 and 2009. and it has really not recovered at all it is bouncing along. so basically we' in a
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holding pattern. in an economies that's growing but job growth is no faster than population growth. >> rose: does job growth have anything to do with increased prottivity. people are still doing more with less in terms of workers. >> that always happens. what ihappening now, it i not that there isn't work for these workers to do. it isn't that there isn't spending power. people aret spending enough to employ the people that we have. it is something that isn't exactly a recession but isn't a recovery in any real sense. >> rose: so the mistake was not to have a bigger estimate plus-- stimulus package. >> that. anwe stopped the freefall and said okay that job is done and turned our attention to other things and there was never a policy to actually bring us back up and so we're not coming back up. >> rose: jared, why was there never a policy? >> well, first of all, before i get to that, lete just say that i would put a somewhat different shade on what paul just described. i think i generally agree and certainly his point
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about the share of the possibility employed just flat lining he is absolutely right. but i was there back in 2009. and i remember the jobs reports coming in negative 700,000 per month on average. even more than that for the first three months of 200 --. i had never seen anything like it we lost over 2 million jobs. gdp contracting at 6%. so you know, the, there is a recovery under way but paul's absolutely right. it's a recovery that's not nearly strong enough to get the job done. now the policies that president obama implemented, the federal reserve, played a very significant role in that turn arnd. going from cataclysm to the kind confi dynamic that paul just described, that ain't nothing. and in fact, thinking back to where we were, it's actually pretty big. but no question that we're growing much too slowly to meet, you know, the basic job and income needs of
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working families. >> yeah, it is a very slow revery. the fact is, our output, our national output has just goten back to where it started. we haven't h the trend growth we would usually have and employment has fallen by almost 6%. the share of the population emoyed. it's really stunng. it is pretty par for the course for a, after a financial crisis. and there are always private sector fecasters. there have been government forecasters especially the federal reserve saying no, it's arod the corner. we're going to be off to the races. i don't think it's going to happen with all the depth that's out there, private and public that's holding us back. i think it's going to take awhile to work this one out. >> i will come to you in debt in a second. >> i think we do have a debt problem. the real question is how much of our challenge is a short term challenge and how much of it is really structural. how much of it is because frankly we haven't been investing in r & d. we haven't been investing in critical infrastructure.
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we have some education problems. we have uncertainty with regard to what our tax laws are going to be. beyond a year and a half from now. and so i think we need to really separate between what's the short term challenges and the causes. >> speak to the short-term issues. >> the short term, obviously is that we had financial services crisis, a housing crisis, a bubble burst. and you know, that ended up having a lot of adverse implications with regard to demand. i mean demand just fell off. employers are somewhat hesitant to commit to be able to hire people back on board until they have a little bit more certainty about where things are going over time. >> you can i just say, there is this terrible tendency t sounds reasonable t sounds wise to saythis is a crisis a longime in the making and therefore a long time getting out but it doesn't have to be that way. people were saying exactly the same thing about the u.s. economy in 1938, 1939 and then along came a big builp for the war and all of audden all those unemployab people were hard at work.
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by accepting this as something that has to happen, there are a lot of big problems but there's no good reason why we should have 14 million people out of work not producing things. >> you know, this notion of debt, it is an important notion, particularly in the longer run but charlie, your point about the short run, you know, all of us have a friend who is kind of a keynesian economist. and he says something to the effect of the question you want to ask about deficits and debt right now is not are they too big but are they big enough. are we actually spending enough to help really build that kind of a bridge over this chasm of demand contractn. by the way giving the cost of beforrowing right now, all the signals arflashing to actually do more in this space, not less. i think paul's writing on this is precisely correct. >> my few is -- view is -- >> i completely disagree, if i can igh in. >> rose: go ahead. >> i do think the monetary policy should be very loose for a long time.
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and i think it's important to concentrate on the fundamentals. the education, infrastructure and a continuespenng on those things. try to reform our tax system. try to use this as an opportunity to do structural reform. get things better. i don't think just hang debt is really an answer. and i think it is a risk. and it might not be a risk tomorrow it is over the longer term. i'm not a debt hawk that thinks you should just start getting rid of it right a watch. but i really beg to disagree with the idea that the stimulus wasn't big enough and that was the problem. >> i think the problem with the stimulus quite frankly is it was big enough but it was not properly designed or effectively implemented and secondly the other problem that you had with it is it was oversold. management was terrible, i personally believe that you have to separate the short term from the short term. i think you can make an argument for additional investments even if it exas bails the short term deficit as long as it is properly designed, effectively implemented and coupled with
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some concrete actions to deal with the structural oblems that we have that we never seem to want to deal with. >> here is a-- a textbook answer. actually the textbook has worked really well right now. one of t funny things is in our discussion the people who actually go with economics 1301 an what it says we should do are regarded as crazy radicals and all the sensible people are making up theories on the fly to be exfla why we can't do anything about mass unemployment. but anyway the point is that yes, ideally we should have a commitment to do seous stuff aboutaising revenues in the long run, controlling health-care costshich would then make it easier or at least easier to sell the notion ofctually spending more in the short run. but the stimulus was not big enough given the scale of this thing. we've got a shortfall of spending. probably over the fall. -- whole, about $3 trillion. >> i think that there is a y to maybe square kind of the circle here. in the following way.
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what i think we're all kind confi saying, maybeith different move cease is that there is a time to worry intensely about deficits an debt. and by the way i'm all for getting the budget on a sustainable path, making a plan to get the budget on a sustainable path starting right now. i think that's precisely what policymakers in this town ought to doi d it ought to be a balanced plan that haspending cuts and revenue increases but it mustn't stt too soon and there is this upside down notion. and i think i hear all the panelists agreeing with this, this upside down notion that if you aggressively start cutting spending in particular today you're going to get big job growth tomorrow. when the opposite is certainly true. now the stimulus, lk, i was one of the folks who was involved in crafting and implementing the stimulus as part of the economics team. and i'm hay to defend what it did. there were obviously political constraints. there were implemeation constraints. coulda woulda shoulda been bigger, bett, sold more
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effectively, sure. but actually, lots of analysis by independent folks agree that that shaved a coup of percentage points off the umployment rate which would be a lot higher now had the estimate plus-- stimulus not been in effect that is not a great selling point but it is true. >> rose: are the constraints talking about what they could get out of congres and didn't have a billion dollar spending plan because the they didn't believe it was feasible all the policymakers if in the white housend president's office would have been in favor of a trillion dollar stimulus as paul want smd. >> look, there were definitely people around the table without wanted to see a larger stimulus. but it's always a balancing act. and we did end up getting, in fact the largest stimulus in the history of the nation. and that discussion started, when that discussion started, we were talking in the realmss of $200 and $300 billion. no one could imagine an $800 billion plan. i'm not saying it was the right size but there a constraints that sometimes get ignored in this kind of look back discussion. >> i think is we don't
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really need to rehash that now. >> i agree. >> granted. the question iwhat do we do now. >> rose: tell me,. >> go ahead, david and then to ken. >> re: what do we do now? on the short term. we'll get to the debt sealing in a minute. >> where do we do now. there has been a huge subsequent event there has been a big political change. >> rose: youean the ecection of 2010. >> rigven going to be more challenging to be able to do something in the short term if it is not coupled with something to deal with the structural problem. that is the reality. they're going to have to be coupled. >> re: of course, but do you think boehner and the republicans are right in terms of holding out and saying they are prepared to walk the plank? >> well, first, i think there's no question that we've got to raise the debt ceiling limit. and i can see way for reasoned and reasonable compromise to be able to do that. >> rose: is that what you expect to happen at the end of t day. >> a reasonable compromise. >> that's what i do. but then reasonable is in the eye of the beholder. how do you define reasonable. i expect some rational resolution will be had and it is important that it be done before the 119 hour.
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because we are playing with a tactical nuclear weapon he and you could have a lot of collateral damage if you don't handle it light. >> rose: what do you say of what standard poors and said a months ago and what moodies said yesterday what does that say about the american debt. >> they are just calling a spade a spade. obviously the risks are higher than they were. if they don't say something about the united states, they're going to look silly. i don't think this is any kind of an immediate risk. i don't know what is going to happen in washington. i don't know about making the budget walk the plank. they're going to make us walk the plank and have a defat, i nuts. but there is a risk further do the road that we're forced to do something more precipitsly. i think in terms of 15 years, maybe that we have to really get this straight. but you know, you have 15 years to get your three-year-old worry about saving for college. and if you start two years before, it's getting kind of late. and i do think we need some adjustnt. but certainly not a rapid one. and i think the important
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thing to do is structural reform. make us grow faster. improve our tax system, build infrastructure, view it as a crisis in that way. i certainly don't think just slashing budgets at some last minute deal is the way to go about business. >> this is, ken q all due respect this is what drives me crazy. of course you want to do structural reform. you always do. but the idea that faced with a crisis of employment which is a crisis of demand, faced th what is fundamentally a problem that we're just not spending enough. that the answer is structural reform that doesn't soe that problem. and in fact it can even make things worse, you know f we raise productivity without increasing demand we might even-- i don't want to push that too hard but this is not-- the immediate problem is we've got, you know, there are 6, 7 million people whohould beworking who aren't and structural reform is to the going to solve that. >> rose: they have no demand on corporations for hiring. >> i agree. and i think that the idea of
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kind of talking about structural reform and tax reform is just not nearly granular enough to meet the needs of the moment. what i've been trying to encourage, folks like us and anyone else who is interested to do is actually think about things that we might be able to do right now especially given the political mix. now there are things that we should do and paul writes about them twice a week. and we should continue to try to push those things. we also should think about the world of the could right now. and ken mentioned infrastrucre. we have a lot of infrastructure needs in this country. and if you think about the kind of ven diagram of the circle of things that republican policymakers might be okay with and the things that democrats like, that increasingly that vanishingly small part of the intersection of those two circles, infrastructure is in there. the payroll tax holiday has been helpful. and a lot of people think and i'm one of them at it would be good to do that again. so you know, there's things
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we can probably do. extending unemployment insurance is going to be really important that is a big multiplier there, especially with today's jobs report. that's the kind of granular policy thinking weeed to contemplate right now. >> i don't agreehat structural reform is not the key. if you talk to policymakers who live through crises,ho have been through it over the years, askwhat worked, what we're really glad about, sure, in the very short run you have to cushon the panic. you have to stop the immediate fault as we did. but they always point to the changes they made, to doing their homework, to getting things right. because what's at stake here is not just having a bad six months. it's having a bad decade and we're coeting with china over thicentury. we're competing with the whole world and we have to do our homework. >> i'm going to let-- i think david wants to weigh in. >> i think we need to bridge this. first we've got a short-term problem that's immediate and that we need to do something about in an intelligent way. ultimately we have a structural challenge but are you not going to solve that in two months, three months
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or six months. my view is that we have to take intellint steps to try to deal with the unemployment. >> but what i'm not hearing yet is what the intelligent steps are. >> can we maybe-- let's talk-- first of all, i mean, if you could wave the politics i would say we should have another large stimulus, as big as the first one, coupled with whatever you like inerms of a ng run fiscal reform. it's not going to happen. so what we are left with is -- >> it is to the going to happen because of the politics. what if people de the argument, we cannot afford to increase the deficit that much. >> the united states is able to borrow as of today at 3% interest rates for ten year. if you look at the real interest rates, the inflation-protected bonds it is under 1%. this was a time wre even if we didn't have an unemployment problem i would say this is a really great time for the federal government to borrow a lot of money and spend it on needed frastructure. this is a completely imaginary problem. we all agree that there are limits but there is no sign that we are anywhere close tos those limits right now.
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>> you wouldn't spend it on infrastructure first. on what kind of estimate plus programs. >> i would say consumer dend oo people would be hier. >> anything that is relatively fast but not six months fast. >> what kind-of-programs make relatively fast increase in the employment rolls? >> well, you know, wpa, i would say a wpa. >> the government should hire -- >> hire a lot-of-people to fill potholes. >> a lot of potholes where i live. >> where i live too, yes. >> go ahead, david. >> i am going to come out in the next six weeks with a specific framework of action that would provide for several hundred billion dolls worth of short-term investments coupled with specific steps to try to be able to demonstrate that we're going to put our financial house in order to. help separate th difference between the short term and structural. when you look at the debt ceiling limit they will have toeach an agreement on 20 spending because there is going to be no joint
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budget resolution they will have toned up coming up with someype of stuto contro thawillforce the 88% of spending athat hasn't been on the table, entitlements, defense and other security spending as well as mprehensive tax reform that will accomplish a number of objectives including generating more revenues as a percentage. economy than hisrically has been the caseso we can't do all of that all at once. but we've got to do certain things now and we've got to put mechasms in place that will force us to be able to deem with those other issues over a reasonable period of time. >> give me an example in terms of short-term investment that are not. >> critical infrastructure right now i'm working with former senator bill bradley, former governor tomorrow ridge and myself are putting together a comprehensive proposal dealing with surface transportation to fundamentally change how do we go about designing what do we do and how do we fund it. >> but how is surface transportation provide immediate jobs. that's a long-term structural change s it not? surface transportation. >> there are needses to exist right now, okay that are defined.
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okay. >> potholes. >> i mean we were able to get-- we were able to get infrastructure out the door not as quickly as some of the other components of the stimulus but there are needs that could be met and they would start creating jobs relatively quickly. one warning on the infrastructure front that i'm all for. turns out that work is a lot more capitol intensive and less labor intensive than many folks thought. >> rose: you mean building infrastructure. that was my point. >> that's what i am talking about. you might not create as many jobs as you think so you have to do other stuff too. you know starting on july 1st, the federal match for state medicai programs that was boosted in the recovery act goes away. if you look at the payroll numbers, one of the things that that's really been holding them bk, month-to-month, the jobs numbers that came out this morning, is the fact that over the past year state and local governments have ed over 300,000 jobs. now i know it's deregueur to beat up on public secr
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workers right now about but a lot of those people are police and firefighters, teachers in your schools, where you have seen a lot of job losses. i would kick up, if there is a politicshere, i would kick up another round of state fiscal relief and i think that would help a lot on the jobs front. i would probably do stuff in the housing market, some of which wouldn't necesrily have much budgetary consequences. >> rose: exactly what i wanted to move to, is what is happening in house. and is it simply a product, a question of too much housing on the market and therefore the demand can nowhere near get close to the supply. >> too muc housing on the market but also too much housing debt. and so again, we should have some program to have debt relief. >>ere agree strongly. >> rose: ken, jump in >> yeah, i think there is this big overhang of mortgages. people underwater. and if you want to have the economy move forward you really have to address that problem. and i think some program of debt relief is where we're going to end up and the sooner we get there the
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better. >> rose: how what we get there. >> well, it is very complicated to dit in a way that's fair. ere are prosals o there. my colleague has one where people basically give away some of the possible future gains they might get from eir house. in return for getting their mortgage written down now so that they have to pay something. there are ideas out there sliding around how to do it. >> this stuff is qte technical so it is always one of these things are all of us say do the debt relief. but we know you can have-- you could try to have cram down in bankruptcy court. you can try to useannie and freddie to repackage and get a lot of debt restructuring. it's hard and the people always say well there's lots of technical difficulties but the stakes are enormous so there ought to be a way to put these various things together and make it happen. >> it's critically important, i think absolutely. i mean there is a big supply and demand imbag and-- balance and something's got to be done. >> a lot of people say oh,
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people are spendthrift but mostly iwasn't. people got caught in a housing bubble, everybody. up to including alan greenspan was telling them it was not a bubble so we need to redress some of the wreckage. >> i agree. and i think fannie and freddie are critical. remember fanni and freddie have originated about 90% of new mortgages over the past year. and they've been qui reluctant to do any prcipal write-downs so i actually think, and you don't necessarily need legislation for this. you need some regulator nudging. and i think putting some pressure on fannie and freddie to get into the principal write down business like many of the others are saying would really help a lot. >> rose: go ahead. >> we ouldn't let this conversation in without talk being monetary policy. >> rose: that is where i was going. you readmy mind. >> that is the last thing, ong other things. the fed has more freedom of action than-- it's hard. >> rose: so we need a q3. >> q e3 for sure and i would like to see the inflation target raised.
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not permanently but a five year inflation target that is 4 instead of 2 and a de facto target seems to be 2 or less which is not what we want. >> iean it may not be the target but-- what is happening with-- not wages. >> this is going to go through the python and inflation will drop off very much next year-- next yea >> rose: . >> temporary bulge in inflation because of commodity inflation it is to the going to last. >> i support t these aggressive monetary actions strongly. i think it's the key to trying to reduce some of the debt. even getting inflation up quite a bit higher than they imagined. but i got to tell you the pushback from the rest of the world was just incredible the chinese are lding a lot of dollars, the russians, the middle east and we just got so much hostility about it i'm sure lot of people were calling ben bernanke and complaining. it's really unfounate. and i would say at the same time the rollout of this policy emphasized too much how it was going to help the
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stock maet which i don't think is what it should be about at all. so unfortunately, it's very hard to do more with monetary policy. >> i kind of agree with ken up to a point. i mean i think that we should do another round as paul suggested of quantitative easing but i'm not sure how much it would do. the price oforrowing a we've been saying is already very low. we know that corporate cash coffers are full. and those folks aren't investing, not because of the price of capital but because they don't see enough return on their investments. one area though-- . >> rose: is that a question of not seeing demand or is it -- >> it's not seeing demand, exactly. but one thing that i think can touch on that, where another roun of quantitative easing could help is in actually pushing further down the value of the dollar to make our exports more competitive and imports less so. the problem is if asian economies manage their currencieses to offset that
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effect, you know, obvus te-- obviously it hurts us. i think the likelihood that you get a q e3 is not very high. >> it is not ben bernanke's fault that they are ving these appreciations. to be blunt, what are they going to do sue us? i mean you know, we have 14 million people unemployed. we need to do what we can. >> rose: what's the administraon's strategy for-- they understand the political risks. so wt is their confidence that they can do sething about unemployment? >> well, i think the administration is kind of stuck in this mode of target-- right now, of really kind of targeting deficits on the budget and less so deficits on the job side. now you began to hear the president today, i mean it was no accident that he went to the chrysler plant. clearly job creation is very much part of their thinking. every forecast has the unemployment rate or at least did before today's
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numbers coming down about a point a year over the next few years. and it's not fast enough but it helps give the president some momentu so i think that the plans with to kind of continue to trot out what you could. try not to create any air pockets by letting things like unemployment insurance or the payroll tax holiday goway too quickly. don't be too aggressive on the spending cuts right away. i think what is new in the mix in the last few weeks, not just with today's numbers t what is new in the mix is it might not be enough for the white house to hold feddee and let things play out. i don't think it is. i think it needs to be more in the spirit of things that paul and i were talking about over the last few minutes. >> what would be a perfect tax reform policy? >> obviously elimination of some deductions would be a starting point. >> i guess--assive elimination. >> rose: you can say that you a starting poi is a massive elimination of deductions. >> and lowering tax rates. congress spends a lot of its money through the tax deductions and they like it
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because it's not transpart. we can't see what they're doingment and i thought-- the bowles simpson gang of six made that point very well it seemed to have got traction for a little while and got forgotten about by the republicans. >> you have to look at what makes economic sense and is feasible. you see dramatic reduction, elimination and better targeting of tax preferences to broaden the tax base, lowering rates. also thinking about eliminating the difference between the capital gains and ode income depending how low you can get the rates but we've got two problems. we've got 51% of americans who don't pay income tax. they pay payroll tax but they don't pay payroll taxes. >> federal income taxes. >> correct. and the median effective income tax rate for the top 1% of americans is 18.8%, okay. so we've got a problem. >> but look. >> way up at the top, it is very low. 400 richest people are
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paying 18%. >> but i mean let me jt say, first of all we're talking about eliminating the two big deductions. the mortgage interest deduction and the employer based health-car deduction, right? that's ttalk about that as if it was a privilege that we could easily take. those are huge middle class things. it's not going to be easy to t rid of them. i don't know why we' talking about lowering rates. the fact of the matter is that you cant tell a reasonable story about getting the u.s. budget into balance with the long-term thatoes not include some increasingevenue, significant increasing revenue. >> increasing revenue by eliminating deductions. >> that is not enough to give you room, to get you a significant reduction in rates. i think we need to reduce the reductions and also raise rates. let me just s i don't-- i don't see any evidence that the u.s. tax system messy as it is, is a major drag on our economy. this is not our problem. we have lots of problems. if i were to make a list of the 20 top things that are worrying me about the u.s. economy, i'm not sure that the tax system would even
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make it into that list. certainly it would be near the bottom. >> i think you need to broaden the tax rate but i disagree that you want to raise rates. i disagree you want to raise rates but dow need to generate more revenues as compar to historical levels. there is another thing to put on the table. we have to put on the table some type of consumption tax for several reasons. one, we have a huge undergrind economy, both legal and illegal. will you never totally capture through an income tax. secondly we've got a lot of people not paying federal income taxes. and thirdl, really wealthy people don't just consume out of their income, they consume out of theirealth. i have two points. first i agree with much of what has been said with one major-- i want to amplify something paul said. you know, i have been involved in this tax reform debate now for a lot of years. and it has really devolved to a point where if you talk about any increase of any magnitude at any tax rate at any time, there is an argument made and there are high-flying economists who
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will back you up on there with i think no evidence at that increase will tank the economy. even if it's 10 basis points. and that's just really hamstringing this discussion. i agree broaden the base and if you can broaden the base and maybe lower some rates it's much, much harder than you think. paul's right a lot of that stuff whacks the middle class and they don't need whacking right now. but we've got to get, and economists need to get out of this mind-set that we can never ever increase the tax rate. it's just, it's noneconomic and 's ultimately a very unhealthy precedent for our society. >> let me say, if i can. >> if the economists were in that mind-set i think politicians were in that mind-set. i mean i think the reason our tax system is not such a problem is we don't collect any taxes relative to a lot of other parts of the world. we were not collecting enough revenues. we need to raise revenues. but i think our system is not going to stand that very well. and if we would improve our system, really, do someing dramatic, we couldave better growth and raise more
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revenues. and i don't think that's pie in the sky. i think that's very real. i think it's low hanging fruit from an economic point of view. >> let me see if ian bridge a specific otax reform. we talked about the home mortgage interest deduction, okay. and about the middle class, it's have important. why dow get home mortgage interest deduction for two homes? all right, middle class typicay has one home. secondly, why a million dollars? why not take you back on the maximum conforming loan under fannie may and freddie mack which is nowhere is a million dollars and which varies by geographic region there are ways to deal with this that make more sense and will generate revenue. >> but a lot less revenue than if you just listed the whole thing. >> sure. what ought to be the debate. if you could define the debate would you like to see take place from now until the election in 2012, but also having to do with long-term problems, what would it be? within we have two big probms in our economy right now.
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fundamental problems. and if policymakers don't fix them ty are being irresponsible. those probms are a deep, deep jobs deficit, number one. and that has a lot to do with the living standards of the broad middle class, they're stagnating because of problem number one. problem number two is our budget deficit is structurally out of balanc we need to solve both of them but there has to be a sequence to it. all of the indicators including the very lowrates of borrowing are telling us to attack the jobs problem first by any of the best means necessary to do it. we can argue about what they are, but we've got to do something. and then once the economy starts growing again it's back on its own speed, private sector job creation is getting close to where it should be, then we shift, we pivot to deficit reduction. we can plan that give ot now and we should. but we don't make that pivot until the economy is doing much better. >> rose: but jared with respect, that's a statement of the issues. what is the debate, dhou see
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the debate that we need to grasp in order to move forward? >> i think-- i think the debate that we need to grasp is that doing anything other than what i just said is not going to be helpful so there is a huge debate right now about whether you should cut spending by this muchr by that much. and you know tt's not really on point right now. >> rose: ken. >> well, i'm certainly concerned about the tra jokt other of the debt. and i'm not impressed by the argumenthat interest rates are very low and we should borrow until we're blue in the face. interest rates can turn on eye dime like the weather. debt can't turn very easily and i do think that's a problem for us over the medium term. i find hard to get away from saying we need to do hard things that we haven't been able to do in terms of infrastructure. what about private spending on infrastructure which seems ver bot inin this cotry. what about finding better ways to really rorm our
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education system, improve r tax system. if we can't do it now, when can we do it? i think that is where the debate needs to be. maybe it doesn't win awe lot of political points. i don't think there is an easy outn the jobs. i think if you just try to buy your way into having more government jobs it will stagnate the economy in the long run, not boost it. >> okay. i'm tempted to say in the long run we were all debt. i think that we're actually inflicting huge cost on the future by allowing unemployment to remain this high. we're losing a generation of young people to the workforce. this is a terrible thing. so look, i would wish we would have a candidate john f. kennedy ran on, you know, we need to get this country moving again. i think that is debate. we should not debate on who can cut more, who can cut spending, without can act sterner about the deficit. i mean yes, fiscal responsibility but we should not be focusing primarily on fiscal responsibility right now. sorry, david. we should be this should be, wh, what does it take to
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get the economy moving again. what does it take to get america back to work. rose: you are convinced it is doable? >> yeah f we had-- if we were suddenly told that there was a teat for space alienses and we had to do an immediate budup and all caution had to be thrown to the winds we would have full employnt faster an y could agine. and then we'd look back and say why did we think that was so hard. the problem, yes there are lots of longun obstacles. u have to worry about debt but most of the obstacles to getting the economy moving again are in our mind, not in the reality. >> jobs for today and jobs for tomorrow. we need to do certain things to try to get unemployment down today and to try to be able to make sure we don't have a double dip recession but we must take stepses to begin to deal with the structural imbalances that lie ahead with regard to our fiscal. we've got to do both. and quite frankly, politically, you are going nowhere fast unless you address both. last thing is we talked about the issue of so many people being uerwatt we are regard to housing. you've got to do something to restructure that debt
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there are so many different adverse implications of not doing anything there. we're all feeling it. >> rose: do you think there is a serious risk of double dip recession? >> i think there is a risk, okayment how serious, i can't say. maybe you want to ask a nobel prize winning economistz. >> but the mn things we ve mass unemployment now. the average unemployed person has been unemployed for 37 weeks-- weeksow it is n a threat that it might happen t is where we are as we speak. >> rose: on that note, thank you paul, thank you david, thank you jared, thank you, ken. >> thank you captioning sponsored by rose communications captioned by media access group at wgbh
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>> funning for charlie rose s been provided by the coca-cola company, supporting this program since 2 o o o 2. and american express. additiona funding provided by these funders
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